At the same time, A.M. Best has downgraded the ICR to "bbb" from "bbb+" of Beazley plc (Beazley) (Jersey), the ultimate holding company of the Beazley group of companies, and of Beazley Group Limited (United Kingdom), an intermediate holding company. Concurrently, A.M. Best has downgraded the debt ratings to "bbb-" from "bbb" on the GBP 150 million junior subordinated notes due 2026 and the USD 18 million junior subordinated notes due 2034 issued by Beazley Group Limited. The outlook for all ratings is stable. Subsequently, A.M. Best has withdrawn the ratings of Beazley, Beazley Group Limited and the associated debt ratings, as the companies have requested to no longer participate in A.M. Best's interactive rating process.

The downgrade of the ratings of Beazley, Beazley Group Limited and the rated debt follows the announcement on 7 February 2013 of the group's offer to buy back the majority of its subordinated debt in 2013 and possible issue of senior debt. The buy-back of GBP 47.3 million of subordinated debt in 2012 and the expected replacement in 2013 of subordinated debt with senior debt reduces the quality of the group's capital according to A.M. Best's rating criteria. In addition, consolidated risk-adjusted capitalisation has been negatively affected since 2011 by the group's active dividend strategy and the full utilisation of its catastrophe risk appetite.

Beazley has a good performance record, supported by strong reserving practices, and is expected to continue to benefit from internal capital generation. In addition, financial flexibility is strong, due in part to relatively low debt leverage and good interest expense coverage. However, the group is expected to continue to follow an active capital management strategy and, taking into account the quality of capital, A.M. Best now expects the group's consolidated risk-adjusted capitalisation to be maintained at a level that supports a "bbb" holding company rating rather than a "bbb+" rating.

Beazley underwrites primarily within the Lloyd's market, with only 2 percent of net written premium in 2011 written outside the Lloyd's market. Syndicates 2623, 623, 3623 and 3622 are managed by Beazley Furlonge Limited. Syndicates 2623 and 623 underwrite business at Lloyd's in parallel, with premiums for the 2013 year of account split 82 percent for syndicate 2623 and 18 percent for syndicate 623, in line with each syndicate's share of overall combined capacity. Syndicates 2623, 3623 and 3622's capital is provided 100 percent by Beazley, via its corporate member, while syndicate 623 is supported by third party capital. The syndicates benefit from the good financial flexibility of the Beazley group as well as from the financial strength of the Lloyd's market, which underpins the security of all Lloyd's syndicates.

Beazley has a track record of good and stable underwriting performance, as demonstrated by an average combined ratio of 91 percent for the period 2009-2012. Its well-balanced underwriting portfolio, which includes a large casualty account, has contributed to its stable results record. The combined ratio for 2012 was 88 percent, and a similar ratio is expected for 2013, in line with the long-term performance of the group. Investment income has been positive but modest since 2008, reflecting the low interest rate environment.

The group has a strong business profile in the Lloyd's market through syndicates 2623 and 623 in particular, reflected in good leadership positions in key lines. A well-diversified portfolio of professional indemnity, property, reinsurance, marine and political risk and contingency business is underwritten. In addition, life, accident and health business is written through syndicates 3623 and 3622.

A factor that may lead to positive or negative rating actions for the syndicates is a change in the rating of the Lloyd's market, which currently carries an FSR of A (Excellent) and an ICR of "a+", and has a stable outlook.

The methodology used in determining these ratings is Best's Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best's rating process and contains the different rating criteria employed in the rating process. Key criteria utilised include: "Rating Lloyd's Syndicates"; "Understanding BCAR for Property/Casualty Insurers"; "Understanding Universal BCAR"; "Catastrophe Analysis in A.M. Best Ratings"; "Rating Members of Insurance Groups"; "Equity Credit for Hybrid Securities"; "Insurance Holding Company and Debt Ratings"; and "Risk Management and the Rating Process for Insurance Companies". Best's Credit Rating Methodology can be found at http://www.ambest.com/ratings/ methodology.

In accordance with Regulation (EC) No. 1060/2009, the following is a link to required disclosures: A.M. Best Europe - Rating Services Limited Supplementary Disclosure.

A.M. Best Europe - Rating Services Limited is a subsidiary of A.M. Best Company, an insurance rating and information source.